Despite record high stock markets, 2017's IPO market has been quite lame. And that probably has something to do with the poor quality merchandise that bankers are hoping to hawk to the public.

A case in point is food delivery service Manhattan-based Blue Apron which hopes to sell shares on the NYSE to raise desperately needed capital. How desperate? According to its prospectus the company ended March with almost $62 million in cash having burned through $20 million that quarter.

There are three reasons this IPO triggers my gag reflex. But before getting into those, let's look at the state of the tech IPO market.

Despite rising markets, 2017 is off to a slower start than 2016's. According to Tomasz Tunguz a venture capitalist at Redpoint Ventures, "Five months into 2017 nine venture-backed technology companies have gone public compared to 14 in 2016."

Tunguz looks happy about the post-IPO performance -- which could make it easier to convince investors to buy in to new offerings. As he wrote, "Four consumer companies and five enterprise companies have popped on average 29% since their IPO pricing. Only two, Carvana, an online used car dealer, and Netshoes, a Brazilian ecommerce company have traded down from their IPO pricing. The other seven have demonstrated the broad public investor demand for new offerings."

Tunguz clearly believes that startups that sell to consumers have the potential to achieve higher market capitalizations if they succeed -- which helps explain why Snap was such a prized offering.

As he noted, "B2B companies’ market cap totals $9.8B which is a third of B2C at $27B. Of course, Snap accounts for $26B of the $27B, or 96% of the consumer market cap. This bar chart characterizes a truism that differentiates consumer companies. There are fewer consumer companies of scale, but when they succeed, they can be monstrously large, and grow much faster than B2B companies."

Snap is also emblematic of three unattractive features of such B2C offerings -- they lose bundles of money, their business is fairly easy for others to copy, and they empower the founders at the expense of the very shareholders whom the bankers hope will enrich them with a rising share price.

These are three of the most compelling reasons to avoid investing in Blue Apron -- founded in 2012 -- it assembles and delivers "meal kits" -- prepared ingredients and a recipe that they can follow to make at home.

It offers two delivery options -- a two-person meal plan (all the fixings for three meals for two people goes for $59.94) and a family plan.

These options save subscribers the immense pain of deciding what to make for dinner, shopping for the ingredients, and carrying them to their kitchens.

Growing unprofitably

Blue Apron has proven popular -- but it has not cracked the code when it comes to charging a high enough price to cover its costs. According to its prospectus, Blue Apron sales soared 10-fold between 2014 and 2016 to $795.4 million from while its net loss increased 16% from 2015 to $54.8 million in 2016.

Sadly its growth is not leading to lower costs. For example, its marketing expenses -- spent on television, digital and social media, direct mail, radio, and podcasts -- soared 10-fold to $144.1 million between 2014 and 2016.

And as it grows, its ingredients and other costs of goods sold are rising as a percent of sales, resulting in a decline in its gross margin from 35% to 31% between the first quarter of 2016 and 2017.

Those costs would likely pale in comparison to what Blue Apron would need to pay were any of its customers to get ill as a result of consuming its food.

As the prospectus noted, “Unexpected side effects, illness, injury or death related to allergens, food-borne illnesses or other food safety incidents (including food tampering or contamination) caused by products we sell, or involving suppliers that supply us with ingredients and other products, could result in the discontinuance of sales of these products or our relationships with such suppliers, or otherwise result in increased operating costs or harm to our reputation. Shipment of adulterated products, even if inadvertent, can result in criminal or civil liability.”

If these diseconomies of scale and potentially high costs were not bad enough, Blue Apron's business lacks what Warren Buffett calls a moat.

Competition

To be sure, the grocery market is large -- $781.5 billion -- and online sales have not gotten much traction -- a mere 1.2% share according to the prospectus-- which could either mean that people like to shop themselves so they can inspect what they buy, or there is great untapped potential for growth -- 8.5% annually from 2017 to 2020, Blue Apron thinks.

Blue Apron's idea is attracting competition from rivals including HelloFresh, Sun Basket and "the vegetarian-focused Purple Carrot," according to the New York Times.

Perhaps this competition is a factor in its slowing growth. After all, as the Times noted, "Its average order value for the first three months of 2017 shrank slightly from the same period a year ago, to $57.23. Both the number of orders per customer and the average revenue per customer also fell slightly in the first quarter of this year compared with the first quarter of 2016."

Weak shareholder protections

If you like a little influence over management to go with your share ownership, you will also want to shun Blue Apron's shares.

After all, the two founders will have unchallenged control.

As the Times noted, Blue Apron "will have three classes of stock: Class A shares that will be sold to the public and will carry one vote per share; Class B shares, which the founders and early investors own, which carry 10 votes per share; and Class C shares, which come with no voting rights and will be used for purposes like acquisitions."

Founders Matthew Salzberg and Ilia Papas -- will own about 40% of the class B shares.